Wise (FY22 earnings)

Wise (LSE: WISE) is a fintech company that provides a money transfer service. It allows customers to send money abroad and get paid in other currencies. Wise is expected to unveil its FY22 earnings results for the year ending March 2022 on Tuesday 28 June.

Although there’s no previous record to compare with in terms of earnings per share (EPS), the earnings preview indicates that revenue is expected to grow by 32%. This is seen as generally positive as Wise continues to take market share from the likes of PayPal and Western Union. Having declined over 60% since its initial public offering, a better-than-expected number on its top and bottom lines could see the Wise share price recover from its bottom.

Moonpig (FY 22 earnings)

Moonpig (LSE: MOON) is an internet-based business. The company makes its money mainly from selling personalised greeting cards, flowers, and gifts. The FTSE 250 firm is expected to release its FY22 earnings results for the year ending April 2022 on Wednesday 29 June.

Moonpig is expecting to show a slight decline in revenue for the most recent year. This is due to the slowdown in sales after the pandemic. Nonetheless, the online business is still expecting its revenue to come in above pre-pandemic levels, with its bottom line also showing an improvement.

Mulberry (FY 22 earnings)

Mulberry (LSE: MUL) is a British fashion company. It is best known for its luxury leather goods, particularly women’s handbags. The small-cap company is expected to post its FY22 earnings results for the year ending April 2022 on Wednesday 29 June.

The earnings preview points towards a slight growth in revenue despite a slow down in retail sales lately. This is due to its status as a luxury brand. Due to a lack of liquidity in the stock, its share price has largely stayed unmoved this year. Consequently, there’s a lack of coverage on the stock. Nonetheless, higher revenue with a better EPS could have investors jumping for joy, sending the stock higher.

The post Earnings preview: Wise, Moonpig, Mulberry appeared first on The Twelfth Magpie.

More reading

• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Up 10.7% today, this under-the-radar FTSE 250 stock still looks good value to me
• Down 20% in a year, I’ve been loading up on this UK growth share!
• 2 excellent growth ideas for a Stocks and Shares ISA in June 2026
• Below £8, this high-growth UK fintech stock looks like a bargain to me

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• Darktrace isn’t currently profitable.
• Wise is moving in the right direction.
• Idox Group could have some serious growth potential.

The Darktrace (LSE: DARK) share price has fallen 55% from its peak of 985p in September 2021. Investors clearly grew overexcited after its blockbuster IPO in April. While the company’s revenue and earnings outlook are improving, I think they still don’t yet justify the share price. I like to invest in tech stocks because of their scalability and critical role in the modern economy. But I think there are a couple of other options that would be better for my portfolio.

Cybersecurity

I still think that Darktrace has the chance to do well in the future. The company is in excellent financial health, has no debt and all its assets easily cover its few liabilities. Its AI driven, machine learning approach to cybersecurity could be nothing short of revolutionary, and its subscription business model could lead to a massive user base over the coming years. The problem simply is that Darktrace isn’t profitable yet and hasn’t been for some time. Revenues have increased by $80m in 2021, but earnings fell to -$149m.

Online payments

Wise (LSE: WISE) is an online payment and cash transfer company based in the UK. It too went public in early 2021 and it too saw its share price soar to 1,140p before slowly crashing back down to 649p at time of writing. A big difference between Wise and Darktrace however, is that Wise is profitable. Its margins are small, but 2021 has been a period of incredible growth for the company. Customers increased by more than 50% from 6m to 10m. Revenue jumped too from £302m to £421m. Again, only £39m of that was profit, but Wise has also been expanding into new territories and developing new products that could pay serious dividends in the future. These small profit margins could cause problems if the company runs into some unexpected issues, but for now all of the numbers are moving in the right direction. I’d be excited to add it to my portfolio.

Public sector software

Idox group (LSE: IDOX) is a software development company I’ve talked about a few times now. Currently trading for a mere 67.75p, it suffers even more acutely than Wise from small profit margins. It is profitable, but had a spotty couple of years in 2018 and 2019.

Earnings reports for the whole of 2021 have not been published yet, but for the financial year ending 31 October 2021, Idox reported revenue increased by 8% to £62.0m, and recurring revenue grew a further 2%.

If it can continue this growth over the coming years, I think we could see the share price rise significantly. It’s a bit of a gamble, but I’d happily add it to my portfolio.

What I’ve taken away from this research is that just because something is in the headlines doesn’t mean it’s a good investment. In fact, it could even mean the opposite. I’ll definitely keep my eye on Darktrace over the coming years, but for now there just seem to be other, better options for my portfolio.

The post The Darktrace share price is still overvalued. Here are 2 UK tech stocks I’d buy instead appeared first on The Twelfth Magpie.

More reading

• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Down 20% in a year, I’ve been loading up on this UK growth share!
• 2 excellent growth ideas for a Stocks and Shares ISA in June 2026
• Below £8, this high-growth UK fintech stock looks like a bargain to me
• After crashing 13.7% today, is Wise now a stock market bargain at 805p?

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Last month, fintech (financial technology) firm Wise (LSE:WISE) made its highly-anticipated debut on the market. Listed at 800p, Wise shares have shot nearly 25% higher in just four weeks. For early investors, that’s a great start.

However, as with any new listing, ‘price discovery’ is likely to create some volatility, at least in the near term. The question of whether to buy Wise shares in August is one I’m pondering right now.

One thing is certain — more visibility regarding this company’s growth trajectory is set to come with its upcoming earnings reports. For now, looking at the prospectus and initial filings is all I have to work with.

Accordingly, I’m going to take a look at its business model and recent financials to get a better picture.

Wise shares: intriguing risk-reward

Online banking and digital wallet stocks are all the rage these days. Companies that facilitate the cross-border transfer of money fuel the international economic ecosystem. Accordingly, I’m looking for the potential fintech superstars of tomorrow. That is to say, the companies with the ability to take market share away from larger institutional banking incumbents.

In this regard, Wise certainly looks intriguing to me. I think companies such as this that offer low-fee services alongside quality execution and a customer-first focus are likely to thrive. There’s no reason to believe that banking can’t be disrupted. Like any centuries-old business segment, eventually something smaller comes along that can do the same thing cheaper and more effectively. Such is the case with Wise.

This is a company with a business model I think could be poised for impressive growth over the medium-to-long term. The company’s FY21 annual results highlighted the growth potential of the firm. Revenue increased 39% year-on-year to £421m. Profits came in at £41m, which is notable given the unprofitable nature of so many fintech listings recently. And the company’s EBITDA margin of 26% is certainly attractive to me.

From a numbers perspective, this is a company that (at least on paper) looks like a great fit as a growth play for my portfolio. However, there are risks.

Valuation certainly rich

Wise shares aren’t cheap. On a price-to-sales basis, the company appears expensive. Given Monday’s market capitalisation of £9.8bn, The shares trade at a price-sales multiple of roughly 23. That’s an incredible valuation for any company operating in the financial services space.

From a backwards-looking fundamentals perspective, Wise shares don’t appeal to me. Indeed, most companies trading at these sorts of valuations don’t make my watch list.

However, this is more of a technology company than a financial services play. Accordingly, I’m willing to look at this stock differently. If the company can continue to grow its top line in the 40% range for the next five years, perhaps the case can be made that these shares can grow into their valuation. Indeed, given the total addressable market Wise is pursuing, I don’t find this argument all that far-fetched. 

Bottom line

In my view, the shares are certainly valued aggressively today. On the one hand, this is a difficult stock to make the case to own right now. However, on the other hand, it’s also a company with great long-term growth potential. 

Accordingly, given my long-term investing time horizon, I’m considering buying Wise shares at these levels.

The post Should I buy Wise shares in August? appeared first on The Twelfth Magpie.

More reading

• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Down 20% in a year, I’ve been loading up on this UK growth share!
• 2 excellent growth ideas for a Stocks and Shares ISA in June 2026
• Below £8, this high-growth UK fintech stock looks like a bargain to me
• After crashing 13.7% today, is Wise now a stock market bargain at 805p?

Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I think we can conclude that last week’s market debut from money transfer firm Wise (LSE: WISE) was a success. Despite wider market concerns about Covid-19 and inflation, shares breached the 1,000p mark on Friday — that’s already 20% up on its opening price of 800p.

So, is this a fintech flash in the pan? I don’t think so. Here’s why.

1. It’s profitable

One thing I like about Wise is that it’s actually making profits. In fact, it’s been doing so for the last four years. Last year, pre-tax profits doubled to £41m.

As a potential investor, this is important to me. At a time when many tech-related stocks are pushing frothy valuations despite being a long way from making real money, Wise is bucking the trend. Contrast this with tech peer Deliveroo. The takeaway delivery firm is reluctant to even forecast when it expects to make a profit.

Wise’s already-profitable business model could also provide some protection if global markets come off the boil. I’m not so sure Deliveroo offers the same protection.

2. No cash raise

The direct listing of Wise shares is another attraction. The first tech stock to do so on the London Stock Exchange, this means it’s not looking for a fresh injection of cash from investors. Instead, it’s merely selling existing shares on the market. There was no need for investment banks to underwrite this (and charge high fees for doing so). 

This move makes Wise similar to the US listing of music streaming service Spotify in 2018. Although operating in very different sectors, it’s worth noting that the latter’s share price is up over 70% since then. 

The fact that Wise isn’t raising cash also reminds me of a quote from star UK fund manager Terry Smith: “Call us old-fashioned but when we’ve bought shares in a company, we like them to send us money after that, not the other way around. We think that’s how this relationship should work.”

3. Huge growth potential

Fintech is all the rage right now and it’s not hard to see why.  Investment in this space hit $44bn last year.

Sure, there are risks. One that immediately jumps out at me is the threat of cybercriminal attacks. Ongoing regulation could also prove a headwind.

Nevertheless, let’s not overlook the fact that this is a huge market and Wise has the potential to continue disrupting a part of the economy which has hitherto been dominated by big banks and the likes of Western Union. According to the company, its customers already send £5bn across borders every month. 

So, will I be buying?

Not yet. Wise shares could climb higher but I’d be inclined to build a stake slowly. As Dr Martens has shown, traders can be quick to sell after the initial hype dies down. No share price rises in a straight line, regardless of its growth potential.

The high number of companies coming to market right now also make me wary. This is nothing against Wise specifically, but it does imply that many founders now think they’ll get an optimum price for their shares. This could indicate markets are peaking. There’s something to be said for zigging when the majority are zagging.

Over the long term, Wise shares could prove a very wise investment. For now, I’ll watch from the sidelines.

The post 3 reasons I’m excited about Wise shares appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Spotify Technology. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.